International Fiance

The Indian economy has been experiencing more stability as far as the Government and political

scene is concerned. There has been reduced internal turmoil resulting from political influences and

this has created a better working environment for industries and businesses in India. The current

United Parties Alliance (UPA) government headed by the Indian National Congress party (INC) has

shown more tolerance towards foreign countries in general and towards foreign investments in

particular, and the recent reforms have placed India considerably high in the 'Doing Business Report,

2009' released by the World Bank (www.doingbusiness.org). However, the ongoing elections in India

are expected to result in turning the tide in favour of the radical Hindu opposition party the Bhartiya

Janta Party (BJP) led National Democratic Alliance (NDA), which is opposed to 'westernisation' of the

Indian culture. On the basis of this, it becomes safer for Starbucks to enter into an alliance/joint

venture with an Indian company that can provide a buffer from the political backlash and

consequent inroads into the Indian business scenario. Moreover, Starbucks needs to be vary of

possible opposition from the existing competitors (CCD, Barista, etc.) through use of political

influence and delaying tactics. However, likelihood of this is fairly low as the Indian market is large

enough to accommodate more players and the incumbents in the Indian gourmet coffee industry

will be minimally affected by Starbucks' entry.

As far as the demographics are concerned, the majority of the Indian population is still rural

(www.eiu.com) but the urbanisation is occurring at a respectable 2.4 % annually. In spite of this, the

sheer size of the total Indian population (1.1 billion in 2007, www.eiu.com), makes the urban

population large enough for businesses to perform well. As the population gets increasingly

heterogeneous and the education levels improve, the standards of living have also been elevated,

which makes the environment extremely conducive for companies like Starbucks that are looked at

as an upmarket entity.